The Method of Moving Average Indicator Use on Forex

Traders are constantly looking for a tool that will accurately indicate the time you need to enter into a
transaction to buy or sell. Regardless from the fact that all professional traders apply individual trading
strategies, that have been repeatedly proven, they are still constantly looking for simple methods to work
effectively on the Forex market.

How to Apply the Method of Moving Average

The use of the simple methods indicates a decrease of the losses and increase revenue. Moving Averages deservedly
belongs to such instruments, because they are used in trading on the foreign exchange market by most of the
traders to eliminate the noise and to find points of entry and exit from the market.

Location of the MA indicatorin the terminal
Settings of the MA indicator

The moving average shows the average price of a currency pair over a certain period of time. When calculating the
MA , a mathematical calculation for a certain period of the average price of a currency takes place. Upon the
change of the price, its average value is also subject to change either down or up.

MA on the chart shows the average price of a particular currency pair for the previous period, i.e. it smooths the
price chart. With a higher number of periods for which the average is calculated, the corresponding chart will be
more smoothed. Moving Averages curves are usually constructed on the basis of the closing prices of currencies,
although they can also be calculated on the base of the average of "High", "Open" and "Low".

If the price moves in the flat and ranges close to the moving average, it’s not recommended to open new positions.

In a shorter period, MA responds more quickly to price changes in the currency pair, however, at the same time, it
will not be enough just to filter "noise". For a longer period, the moving average will neutralize the impact of
the noise, but the respond to the trend changes will be with delay.

Use of Moving Averages

In the role of the technical indicator traders, in real life, the Moving Average is most commonly used. Usually
these trading platforms like MT4, which is used to trade on demo and real Forex accounts, 4 types of moving
averages are presented: simple, exponential, smoothed and linear weighted moving average.

MA smooths price data to form a trend indicator. They will not predict price direction, but will determine the
direction of price movement acting belatedly. Moving averages are starting to lag behind current prices, because
their value at all time periods are based on the results of which currency had showed before. Regardless of this
lag, moving averages can help smooth the change in prices of a currency pair and filter out noise.

Settings of the MA indicator on the chart

This moving is considered the basis for many technical indicators, for example, MACD and Bollinger Bands. Simple
and Exponential Moving can be used to determine trend direction, points of exit and entry into the market.

As the other indicators, MA are used for facilitation for the trader ability to project future prices. Considering
the angle of the slide, you are more likely to determine the direction and strength of the potential price
movements in the currency market.

As already has been mentioned, this technical indicator refers to the main indicators of the Forex market.
However, until such time as you do not decide for themselves, with clear rules of moving averages at work on demo
accounts, it is not necessary to open a real trading account. Since otherwise the chance to be among the losers
will increase considerably.

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Margin trading on the Forex market is speculative and carries out a high level of risk, including full loss of deposit. You must understand this and decide by yourself whether this type of trading fits you, considering the level of knowledge in a financial area, trading experience, financial capabilities and other factors.